Value Traps? 6 Name Stocks Under $3 With Rising Inventories

The following is a list of stocks priced under $3 that have seen inventories grow faster than revenues during the most recent quarter, an accounting trend that might raise a flag for some investors.

When a company's inventories are rising at a faster rate than its sales, it may indicate that the company is having trouble selling its merchandise. In extreme cases, the company might have to mark down the value of its inventory.

But it's highly likely that there are less sensational explanations for the difference between sales and inventory growth. So be sure to use this list as a starting point for your own analysis--check out the 10-Q and related management discussions to see if there's a good explanation for this trend.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

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List sorted by market cap.

1. Eastman Kodak Co. (EK): Provides imaging technology products and services to the photographic and graphic communications markets worldwide. Current price at $1.28. Revenue grew by -4.5% during the most recent quarter ($1,485M vs. $1,555M y/y). Inventory grew by 11.45% during the same time period ($837M vs. $751M y/y). Inventory, as a percentage of current assets, increased from 20.64% to 27.42% during the most recent quarter (comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30).

2. JA Solar Holdings Co., Ltd. (NASDAQ:JASO): Engages in the design, development, manufacture, and sale of photovoltaic solar cells and solar products, which convert sunlight into electricity in the People's Republic of China. Current price at $2.41. Revenue grew by 12.11% during the most recent quarter ($2,669.11M vs. $2,380.7M y/y). Inventory grew by 121.94% during the same time period ($1,621.65M vs. $730.68M y/y). Inventory, as a percentage of current assets, increased from 16.13% to 19.78% during the most recent quarter (comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30).

3. Office Depot, Inc. (NASDAQ:ODP): Office Depot, Inc., together with its subsidiaries, supplies office products and services. Current price at $2.55. Revenue grew by 0.4% during the most recent quarter ($2,710.14M vs. $2,699.47M y/y). Inventory grew by 6.57% during the same time period ($1,253.23M vs. $1,176.02M y/y). Inventory, as a percentage of current assets, increased from 40.97% to 45.47% during the most recent quarter (comparing 13 weeks ending 2011-06-25 to 13 weeks ending 2010-06-26).

4. Sappi Limited (NYSEMKT:SPP): Sappi Limited manufactures and sells various pulp, paper, chemical cellulose, and wood products worldwide. Current price at $2.89. Revenue grew by 12.48% during the most recent quarter ($1,802M vs. $1,602M y/y). Inventory grew by 19.37% during the same time period ($949M vs. $795M y/y). Inventory, as a percentage of current assets, increased from 35.33% to 41.62% during the most recent quarter (comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30).

5. Suntech Power Holdings Co. Ltd. (NYSE:STP): Engages in the design, development, manufacture, and marketing of photovoltaic (PV) products. Current price at $2.40. Revenue grew by 32.89% during the most recent quarter ($830.7M vs. $625.1M y/y). Inventory grew by 49.76% during the same time period ($571.4M vs. $381.55M y/y). Inventory, as a percentage of current assets, increased from 18.81% to 22.35% during the most recent quarter (comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30).

6. United Microelectronics Corporation (NYSE:UMC): Operates as a semiconductor wafer foundry. Current price at $2.22. Revenue grew by -5.36% during the most recent quarter ($28,150M vs. $29,745M y/y). Inventory grew by 5.55% during the same time period ($11,390M vs. $10,791.31M y/y). Inventory, as a percentage of current assets, increased from 10.77% to 14.02% during the most recent quarter (comparing 3 months ending 2011-06-30 to 3 months ending 2010-06-30).

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